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Americas Executing our strategy
Mark MullinMember of the Management BoardCEO AEGON Americas
London – June 19 & 20, 2012 Analyst & Investor Conference
Darryl ButtonCFO AEGON Americas
22
Key messages
Accelerated delivery of strategic initiatives in 2012
Continued growth in core businesses despite market conditions
Adapting and revising products to better respond to market conditions
Reinvesting cost savings to fund business development
Increasing brand awareness through Tomorrow Makers campaign
3
Clear targets to support overall Group targets
Achieve return on capital* of
8.5%by 2015
Grow underlying earnings before tax by
3-5%(7-9% excludingfixed annuities)
of underlying earnings by 2015
30-35%
Double fee-based earnings to
by 2015
Increase annualoperational free cash flow by
25%
on average per annum between 2010 and 2015
* Excludes leverage benefit at holding
L&P: stable top line growth supported by aggressive expense management and operational efficiencies
IS&R: accelerate growth of fee-based businesses and effectively manage the fixed annuity book
ES&P: rapid growth strategy through high quality service, innovation and expanded outsourced service model
Canada: middle market strategy supplemented by aggressive expense management
Latin America: rapid top line growth through distribution expansion and product innovation
Achieving our 2015 goals
4
Executing on strategic initiatives
Grow sales through innovative products that are attuned with capital markets and meet the needs of customers
Expand footprint in traditional channels
Leverage opportunities to add new distribution for diversification and scale
Launched TransCentral, a web-based communication hub
Enhancing employee knowledge about our business through on-line video sessions
Implementing personal development plans across the organization
Accelerate and refine Transamerica brand positioning to establish a clear and distinct identity in the marketplace
Net Promoter Score – evaluate pilot program results, plan to increase coverage across Americas organization in next annual survey
Launched customer license program Q2 2012
Improve margins through additional operational efficiencies and technology enhancements
Manage expenses and reduce headcount
5
Staying focused on our core businesses in key attractive markets
Life and protection
Variable annuities
Retail mutual funds
Pensions and worksite
Latin America and Canada
US – the largest life insurance and pension market in the world► Aging baby boomers will drive growth
in retirement assets► Increased personal responsibility for
health care and retirement needs
Canada – underserved and profitable middle market; loyal distribution niches
Latin America► Brazil – largest insurance market in Latin
America, 5th most populous country in the world► Mexico – 2nd largest insurance market in Latin
America, closely linked to US economy
US*# 6 life insurance#10 variable annuities#13 pensions#9 voluntary benefits
Canada*Top 5 life insurance
Mexico*#10 total life
Brazil*#6 non bank life
* Multiple sources including: LIMRA, Morningstar, Chatham Partners, Plan Sponsor Recordkeeping Survey, CFO Buyers Guide, Pensions & Investments, and AMIS
Markets we are growing
6
2009 2010 2011 3M 2012
Up 3X4.1
5.2
6.5
2.10.7
3M 2011 0%
100%
200%
300%
2003 2004 2005 2006 2007 2008 2009 2010 2011****
Continued growth in fee-based businesses…
Annual growth in VA sales
Pension asset growth
Gross deposits*(USD billion)
Net deposits*(USD billion)
* Includes VA, MF, pension and SVS**Source: LIMRA as of Q1 2012
***2011 industry data is an estimate based onCerulli Quantitative Update 2011 – Private & Public DB/DC
263%
136%
Transamerica CAGR of 13% Industry CAGR of 4%
-30%
-10%
10%
30%
50%
2006 2007 2008 2009 2010 2011 Q1 12
TransamericaIndustry**
Continued growth…outpacing the industry
2009 2010 2011 3M 2012
Up 27%
21.5
26.6
31.4
9.57.5
3M 2011
7
InnovationLaunched RENEW, a new online five-step process to drive higher participant savings rates
Vigilant product portfolio management – speed-to-market to reprice and/or introduce new products
Competitive advantages / strategic positioningLeverage technology to drive down unit cost, enhance margin, and improve customer service
Leverage market dynamics to grow SVS fee income (8bps -> 15bps -> 21bps)
Expanding distribution through alternative channelsIncrease variable annuity sales through private label partnerships, e.g. Vanguard, CUNA, TD Ameritrade
Expand in fee-based advisor channel – ARIA
Cross-selling with mutual fund distribution
Initiated new Enhanced Distribution Strategy (EDS) within top-10 distribution partnerships to maximize per firm market share
Continued fee-based earnings growth driven by…
26%
74%
15%
85%
2007 Q12012
Fees Non-fee based
Customer serviceOffer value-added services for brokerage channels and advisors to grow their business while maintaining cost objectives► Platinum service for USD 1M+ advisors
achieving sales CAGR of 4 times our non-platinum producers
► Three-year trend of improved customer service scores on critical attributes from advisors*
AEGON Americas underlying earnings
* Source: industry leading third party surveyor
8
Growth in products that perform well in a low interest rate environment► Whole life growth driven by strong sales through
agency channels and new Independent Marketing Organizations (IMOs)
► Indexed Universal Life product expanded to brokerage channel
► Increased supplemental health production, in part by introducing prescription plan coverage
► Growth in non-interest sensitive basic protection within specialty lines, such as travel and student health
► Voluntary benefits 21% growth in Q1 2012, primarily due to favorable solutions for employers to control their health costs
Growing life and health businesses while managing through low interest rates
0
500
1.000
1.500
2009 2010 2011 Q1 11 Q1 12Voluntary Benefits
Other Life and Protection*
Fixed Universal Life
Life, health and specialty sales(USD million)
* Other Life and Protection includes term, whole life, indexed universal life, variable universal life and accident and health
Fueling life and protection growth through broadening distribution► Leverage inbound agent capabilities within the Affinity marketing group
► Recruit and retain new distribution/producers and improve licensing ratios
► Over 20% of Q1 2012 sales gained from new distribution added post-2008
Canada and Latin America
9
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
0
200
400
600
800
1000
1200
1400
1600
1-2-2008 1-2-2009 1-2-2010 1-2-2011 1-2-2012
S&P 500 10 year treasury rates
Responsive to market conditions
Market environment
VA repricing - increased fees, product enhancement
VA and MF product innovation (introduced volatility adjusted funds, tiered pricing by equity level, tactical income fund and alternative strategies retail funds)
Increased SVS fees
Repricing / redesigning life products
Withdrawal of life products
10
Business development and growth
Growing the business by reinvesting cost savings
Investing in technology and innovationExpanding distribution and channel diversityContinuing to enhance speed-to-market of new products and repricingGrowing Latin America
* Excluding restructuring charges, run-off business, employee benefit expenses and Corporate Center cost allowance
Operating expenses* 2011
Business development and growth
Cost reduction initiatives
Operating expenses* 2012 - projected
Back office consolidationsLeveraging technology to reduce staff and improve serviceBroker-dealer consolidationVendor management / contract optimizationDistribution restructuring
Cost reduction initiatives
Operating expenses* – Americas (USD million)
1,6845% (4)%
Up 1%
11
Continued focus on operational excellence
Operationalefficiencies
Technology enhancements
Electronic application system in Career Agency
Straight-through capabilities for annuity applications – up to 40% of submitted business
Mobile apps for:► Term and long term care sales presentations and quotes► Enhanced pension participant account access
Expanding e-delivery participation
Website enhancements, including “click-to-chat” for direct contact with life agent
Analytics and modeling capabilities improving lead generation and response rates
Consolidated Canadian operations; driving synergies with US operations
System and product consolidation in life business
Institutional service center driving cost reductions in pension business
Low cost provider in annuities with continued opportunities being realized through sourcing alternatives and launch of Lean initiatives
12
Brand Positioning – We Are The Tomorrow Makers
Strong name recognition among consumers and financial professionalsDeveloped unique brand positioning that unifies our company, employees, intermediaries and customers► Launched new mass media campaign utilizing high impact TV,
print, digital and trade
► Message resonating with employees
► Modest gains with consumer brand awareness
► Significant increase in awareness with intermediaries, high net worth and engaged sports fans – NCAA, golf
Commitment to continue to invest in the value of the brand
1313
Appendix
14
Life and Protection at a glance
Life, health and niche productsStable market with solid earnings growthTop 10 player in individual life / supplemental healthHigh quality, low risk earningsLower capital markets leverageStrong distributable earnings
Life sales Rank* Market share*
TOTAL 6 4.3%
Individual term life 21 1.4%
Individual universal life 6 5.0%
Indexed universal life 3 10.7%
Individual whole life 8 3.6%
* Source: LIMRA as of Q1 2012** Life sales are standardized = recurring premium + 1/10 of single premium; health sales are not standardized*** Gross premiums excluding Asia activities previously reported in the Americas segment
42%
58%
HealthLife
44%
56%
L&P
67%
33%
L&P
Other Americas businesses
Q1 2012 L&P sales: Life vs. Health** (USD million)
FY 2011 AEGON AmericasInforce premium*** (USD billion)
Q1 2012 AEGON AmericasUnderlying earnings (USD million)
297 10.7 383Other Americas businesses, including run-off
Business profile Leading in our chosen markets
15
Individual Savings and Retirement at a glance
63%
33%
4%
Annuity and mutual fund products
Strong growth potential
Fee-based quality earnings
Some capital markets leverage post hedging
Variable annuities
Retail mutual funds
Fixed annuities
Growing fee business
8.4 billion
Gross deposits FY 2011(USD billion)
Earnings mix to VA and mutual fundsBusiness profile
0%
25%
50%
75%
100%
2010 2011 Q1 2012*Mutual funds Variable annuities Fixed annuities
28%
23%
49%
Gross deposits FY 2008(USD billion)
12.1billion 59%
37%
4%
2.0billion
Gross deposits Q1 2012(USD billion)
* Q1 2012 annualized
16
Employer Solutions and Pensions at a glance
Comprehensive solutions for over 34,000 American employers
All pension markets covered: DB, DC, small to large, private and public, bundled and unbundled
Voluntary employee benefit products and services –top 10 provider
Some capital markets leverage (fee-based)
Industry validation
0,68%0,65%
0,58%0,54%
0,50%0,48%
0,54%0,58% 0,58%
0,47%
0,40%0,37%
0,29%0,26%
0,13%
0,21% 0,22% 0,24%
0,00%
0,20%
0,40%
0,60%
0,80%
2007 2008 2009 2010 2011 Q1 2012 2015p
Fee revenue / AUMOperating expense / AUMPre‐tax underlying earnings / AUM
Pension margin(bps)
Business profile
17
Canada at a glance
Delivering on our strategic prioritiesEasy to do business with: implementation of straight-through processing; service strategy; implementation of business improvement methodologies
Middle market growth opportunities: implementation of distribution strategy – World Financial Group (WFG), Managing General Agents (MGAs)
Diversified risk profile: in-force reinsurance programs; UL hedging
Individual insurance products – top 5 player
Mutual funds
Repositioned and profitable product portfolio
Reduced and diversified risk profile
Middle market focus
Business profile Strategic priorities
Strengthen relationships with distribution
Standard products and services
Middle market emphasis
Diversified risk profile
Alignment and engagement of employees
Aggressive expense management
18
Latin America at a glance
Brazil: Mongeral AEGON is a non-bank life company focused on the middle market primarily through worksite marketing; also manufactures and distributes pension products
Mexico: Argos AEGON is a non-bank life insurance company focused on the middle and lower markets through worksite marketing
Business profile Strategic priorities
Grow life portfolio through new products and distribution
Continued geographic expansion in Brazil regions that support our market demographics
Look for strategic opportunities to significantly increase our presence in Latin America
Delivering on our strategic prioritiesFirst to Brazil market with domestic high net worth solution
Aggressively growing worksite model in both markets
Recently launched affinity marketing and proprietary retirement products in Brazil
Growing sales through bancassurance partnership in Mexico
Expanding tied agent recruiting in both markets
WWW.AEGON.COM
For questions please contact Investor Relations+31 70 344 [email protected]
P.O. Box 852501 CB The HagueThe Netherlands
20
Cautionary note regarding non-GAAP measuresThis document includes a non-GAAP financial measure: underlying earnings before tax. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 "Segment information" of AEGON’s Condensed consolidated interim financial statements.
Local currencies and constant currency exchange ratesThis document contains certain information about AEGON’s results and financial condition in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. Certain comparative information presented on a constant currency basis eliminates the effects of changes in currency exchange rates. None of this information is a substitute for or superior to financial information about us presented in EUR, which is the currency of AEGON’s primary financial statements.
Forward-looking statementsThe statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to AEGON. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. AEGON undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:Changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom;Changes in the performance of financial markets, including emerging markets, such as with regard to:
• The frequency and severity of defaults by issuers in AEGON’s fixed income investment portfolios; and• The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities AEGON holds;• The effects of declining creditworthiness of certain private sector securities and the resulting decline in the value of sovereign exposure that AEGON holds;
Changes in the performance of AEGON’s investment portfolio and decline in ratings of the company’s counterparties;Consequences of a potential (partial) break-up of the euro;The frequency and severity of insured loss events;Changes affecting mortality, morbidity, persistence and other factors that may impact the profitability of AEGON’s insurance products;Reinsurers to whom AEGON has ceded significant underwriting risks may fail to meet their obligations;Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels; changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates;Changes in the availability of, and costs associated with, liquidity sources such as bank and capital markets funding, as well as conditions in the credit markets in general such as changes in borrower and counterparty creditworthiness;Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets;Changes in laws and regulations, particularly those affecting AEGON’s operations, ability to hire and retain key personnel, the products the company sells, and the attractiveness of certain products to its consumers;Changes in the policies of central banks and/or governments,;Regulatory changes relating to the insurance industry in the jurisdictions in which AEGON operates;Changes in customer behavior and public opinion in general related to, among other things, the type of products also AEGON sells, including legal, regulatory or commercial necessity to meet changing customer expectations;Acts of God, acts of terrorism, acts of war and pandemics;Lowering of one or more of AEGON’s debt ratings issued by recognized rating organizations and the adverse impact such action may have on the company’s ability to raise capital and on its liquidity and financial condition;Lowering of one or more of insurer financial strength ratings of AEGON’s insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability of its insurance subsidiaries and liquidity;The effect of the European Union’s Solvency II requirements and other regulations in other jurisdictions affecting the capital AEGON is required to maintain;Litigation or regulatory action that could require AEGON to pay significant damages or change the way the company does business;As AEGON’s operations support complex transactions and are highly dependent on the proper functioning of information technology, a computer system failure or security breach may disrupt the company’s business, damage its reputation and adversely affect its results of operations, financial condition and cash flows;Customer responsiveness to both new products and distribution channels;Competitive, legal, regulatory, or tax changes that affect profitability, the distribution cost of or demand for AEGON’s products;Changes in accounting regulations and policies may affect AEGON’s reported results and shareholder’s equity;The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including AEGON’s ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; Catastrophic events, either manmade or by nature, could result in material losses and significantly interrupt AEGON’s business; andAEGON’s failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives.
Further details of potential risks and uncertainties affecting the company are described in the company’s filings with NYSE Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Disclaimer